EXHIBIT
10.5


 


NOTE PURCHASE AGREEMENT


 


Dated
as of July 2, 2008


 


Between


 


CELLU
TISSUE HOLDINGS, INC.


Issuer
of the Notes


 


and


 


UBS
High Yield Relationship Fund, a series of the UBS Relationship Funds


Purchaser


 






 


$5,000,000
AGGREGATE PRINCIPAL AMOUNT


OF
9 3/4% SENIOR SECURED NOTES


DUE
2010


 

















 


NOTE PURCHASE AGREEMENT


 


This NOTE PURCHASE AGREEMENT is dated as of July 2,
2008, by and between Cellu Tissue Holdings, Inc. (the “Company”)
and UBS High Yield Relationship Fund, a series of the UBS Relationship Funds
(the “Purchaser”).


 


RECITALS


 


WHEREAS, the Company and certain of its Subsidiaries
have entered into an Indenture dated as of March 12, 2004 with The Bank of
New York as Trustee (as supplemented and in effect on the date hereof, the “Indenture”),
relating to its 9 3/4% Senior Secured Notes due 2010 (the “Senior Secured
Notes”) pursuant to which the Company is authorized to issue additional
Senior Secured Notes subject to the terms and conditions specified in the
Indenture.


 


WHEREAS, the Company desires to issue pursuant to
the Indenture and sell to the Purchaser, and the Purchaser has agreed to
purchase, subject to the terms and conditions herein, $5,000,000 aggregate
principal amount of Senior Secured Notes (the “Notes”).


 


WHEREAS, the Company will use the proceeds of the
issuance and sale of the Notes to provide a portion of the financing for the
purchase by the Company of certain assets (the “Acquisition”) pursuant
to the Acquisition Agreement.


 


AGREEMENT


 


In consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:


 


ARTICLE
1

DEFINITIONS


 


1.1.                              Certain Defined Terms.  Capitalized terms used and not otherwise
defined in this Agreement are defined in Appendix I.


 


ARTICLE
2

PURCHASE AND SALE OF THE NOTES


 


2.1.                              Purchase and Sale of Notes.  Subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties set forth
herein, the Company hereby agrees to issue and to sell to the Purchaser, and by
its acceptance hereof the Purchaser agrees to purchase from the Company at the
Closing, $5,000,000 aggregate principal amount of the Notes for the purchase
price of $4,612,500.


 


2.2.                              Closing.  The purchase
and sale of the Notes pursuant to Section 2.1 shall occur at a closing
(the “Closing”) to be held on July 2, 2008, at 10:00 a.m.
(Boston time), at the offices of Ropes & Gray LLP, One International
Place, Boston, MA 02110, or at such other date, time and/or location as may be
agreed upon by the parties hereto.


 


2.3.                              Delivery of Notes.  Notes will be
in substantially the form of Exhibit A. 
The Company will deliver the Notes to the Purchaser, against payment by
or on behalf of the Purchaser of the purchase 


 

















 


price therefor by wire transfer of Federal (same day) funds to
JPMorgan/Chase Bank, New York, New York, ABA #021000021, Account Name: Cellu
Tissue Corp., Account #114-733805.


 


2.4.                              Use of Proceeds.  The proceeds of the sale by the Company of
the Notes hereunder shall be used to provide a portion of the financing for the
Acquisition.


 


ARTICLE
3

TERMS OF THE NOTES


 


3.1.                              Notes Under Indenture.  The Notes
shall be issued under the Indenture and shall be subject to all the terms and
conditions thereof and entitled to all the benefits thereof.


 


3.2.                              CUSIP.  The Purchaser
understands that because the Notes are issued at a discount the Notes will have
a CUSIP number through the maturity of the Notes which is different from the
CUSIP number of the Senior Secured Notes previously issued under the
Indenture.  The Purchaser further
understands that the Notes will not either now or in the future be entitled to
share the same CUSIP number as the notes previously issued under the Indenture.


 


3.3.                              Registration Rights.  The Purchaser
understands and agrees that the Company is and will be under no obligation to
effect any registration of the Notes under the Securities Act.


 


ARTICLE
4


REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER


 


The Purchaser represents and
warrants to and for the benefit of the Company that:


 


4.1.                              Legal Capacity; Due
Authorization.  The
Purchaser has full legal capacity, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder.  This Agreement has been duly authorized,
executed and delivered by the Purchaser and is the legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance
with its terms subject to bankruptcy and general principles of equity.


 


4.2.                              Restrictions on Transfer.  The Purchaser has been advised that the Notes
have not been registered under the Securities Act or any state securities laws
and cannot be resold unless registered under the Securities Act and applicable
state securities laws or unless an exemption from such registration
requirements is available, and that accordingly the Notes may have to be held
by the Purchaser for an indefinite period of time.  The Purchaser is purchasing the Notes for its
own account and not with a view to, or for resale in connection with, the
distribution thereof; provided, however, that subject to
compliance with the restrictions contained or referred to in the Indenture, the
Notes and this Agreement, the disposition of such Purchaser’s property shall at
all times be and remain under its sole discretion and control.  The Purchaser acknowledges and agrees that
each Note will bear a legend (or a substantially similar indication) indicating
that the Notes have not been registered under the Securities Act or under any
state securities laws and may not be sold, offered for sale or otherwise
transferred in the absence of an effective registration statement under the
Securities Act and applicable state securities laws or an exemption from
registration thereunder, in addition to any other legends required by
applicable state blue sky laws.


 


4.3.                              Accredited Investor, etc. 
The Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Notes, is able to incur a complete loss of such investment
and to bear the economic risk of such investment for an indefinite period of
time.  Such Purchaser has been given
access to all information with respect to the 


 


2

















 


Company requested by the Purchaser and has had access to, and adequate
opportunity to ask questions of and request additional information from,
officers and representatives of the Company concerning the Company’s business,
operations and financial condition.  Such
Purchaser (i) is an “accredited investor” as that term is defined in
Regulation D under the Securities Act and (ii) has been represented by
counsel in the purchase of the Notes and has been advised with respect to the
restrictions imposed by state and federal securities laws with respect to the
disposition of the Notes.


 


4.4.                              Independent Decision.  The Purchaser has independently and without
reliance on the Company, and based on such information as the Purchaser has
deemed appropriate, made its own analysis and decision to enter into this
Agreement and the transaction contemplated hereby, except that the Purchaser
has relied upon the Company’s express representations, warranties and covenants
made herein.  The Purchaser acknowledges
that the Company has not given the Purchaser any investment advice, credit
information or opinion on whether the purchase of the Notes is a prudent
investment decision.


 


4.5.                              Brokerage Fees, etc.  The Purchaser represents and warrants to the
Company that no broker’s, finder’s or placement fee or commission will be
payable to any Person alleged to have been retained by the Purchaser with
respect to any of the transactions contemplated by this Agreement.


 


ARTICLE
5

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


In order to induce the Purchaser to enter into this
Agreement and to purchase the Notes hereunder, the Company represents and
warrants for the benefit of the Purchaser that, as of the Closing Date (unless
otherwise stated, both before and after giving effect to the issuance of the
Notes):


 


5.1.                              Organization, Good Standing and
Qualification.  The Company is a corporation, duly organized
and validly existing under the laws of the State of Delaware and has all
requisite power and authority to conduct its business as now conducted.  The Company is duly qualified as a foreign
entity and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not reasonably be expected to result in a Material
Adverse Effect.  Certified copies of the
Governing Documents of the Company have been delivered to the Purchaser and
such copies of the Governing Documents are correct and complete.


 


5.2.                              Authorization.  The Company has taken all necessary corporate
action to authorize the execution and delivery of this Agreement and the Notes
and the performance of its obligations hereunder and thereunder.  This Agreement constitutes the valid and
legally binding obligation of the Company enforceable in accordance with its
terms subject to bankruptcy laws and general principles of equity.


 


5.3.                              Valid Issuance of the Notes.  The Notes, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will
be duly and validly authorized and issued, fully paid, free of restrictions on
transfer, other than restrictions contained or referred to in the Indenture, the
Notes or this Agreement and enforceable in accordance with their terms subject
to bankruptcy laws and general principles of equity.  Based in part upon the representations of the
Purchaser in Article 4 of this Agreement, the Notes will be issued in compliance
with all applicable United States securities laws.


 


3

















 


5.4.                              Financial
Statements and Other Information.


 


5.4.1.                            The Company has
previously furnished to the Purchaser copies of the Company’s filing on Form 10-K for the fiscal
year ended February 29, 2008 (the “Company SEC Filings”).


 


5.4.2.                            As of the time it was filed with the SEC
(or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing):  (i) each
of the Company SEC Filings complied in all material respects with such
requirements of the Securities Act or the Exchange Act as were applicable
thereto; and (ii) none of the Company SEC Filings contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.


 


5.4.3.                            The financial statements (including any
related notes) contained in the Company SEC Filings fairly present, in all
material respects, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated results of
operations of the Company and its Subsidiaries for the periods covered thereby
in accordance with GAAP applied on a consistent basis throughout the periods
covered (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC, and except that unaudited financial statements may not contain footnotes
and are subject to year-end adjustments).


 


5.4.4.                            As of the date of this Agreement, neither
the Company nor any of its Subsidiaries has any liabilities of the type
required to be disclosed in the liabilities column of a balance sheet prepared
in accordance with GAAP, except for:  (i) liabilities
disclosed in the financial statements (including any related notes) contained
in the Company SEC Filings; (ii) liabilities incurred in the ordinary
course of business since the date included in the financial statements of the
Company SEC Filings; and (iii) liabilities that are not material in the
aggregate to the Company and its Subsidiaries on a consolidated basis.


 


5.4.5.                            The information with respect to the
Company and its Subsidiaries contained in the Private Placement Memorandum
dated April 2008 relating to $37,500,000 9 3/4% Senior Secured Notes (the “Secured
Notes”) of the Company due 2010 (the “Placement Memorandum”) when
taken as a whole with the Company SEC Filings did not as of the date thereof
contain an untrue statement of material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were
made.  The information contained in the
Placement Memorandum with respect to Atlantic was prepared in good faith by the
Company based on information obtained from Atlantic.  Notwithstanding the foregoing, no representation
regarding projections or forward looking statements is being made in this Section 5.4.5
and the disclaimers and cautionary statements with respect thereto set forth in
the Placement Memorandum are incorporated herein by reference.


 


5.4.6.                            The Company maintains an effective system
of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of
the Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, including controls and procedures
designed to ensure that such information is accumulated and communicated to the
Company’s management as appropriate to allow timely decisions regarding
required disclosure.  The Company has
carried out evaluations of 


 


4

















 


the effectiveness of its
disclosure controls and procedures as required by Rule 13a-15 of the
Exchange Act.


 


5.4.7.                            The Company maintains systems of “internal
control over financial reporting” (as defined in Rule 13a-15(f) of
the Exchange Act) that comply with the requirements of the Exchange Act and
have been designed by, or under the supervision of, its principal executive and
principal financial officers, or persons performing similar functions, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. 
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  There are no material weaknesses in the
Company’s internal controls.


 


5.5.                              Material Adverse Effect.  Since February 29,
2008, no event or condition has occurred which affects the Company or its
Subsidiaries which has had or could be reasonably expected to have a Material
Adverse Effect.


 


5.6.                              Consents.  No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with,
any federal, state or local governmental authority, or any third party in
connection with any agreement to which the Company or any of its Subsidiaries
is party or by which its properties are bound, is required to be obtained or
made by the Company or any of its Subsidiaries in connection with the issuance
of the Notes or the execution and delivery of the Subsidiary Guarantee other
than such of the foregoing as have been or will be obtained prior to the
Closing or where the failure to obtain the consent of a third party would not
affect the ability of the Company to enter into the Agreement, to issue the
Notes and perform its obligations under the Notes.


 


5.7.                              Litigation.  Except as disclosed with the Company SEC
Filings, there is no action, suit, proceeding or investigation pending or, to
the Company’s knowledge, currently threatened that questions the validity of
this Agreement or the right of the Company or any of its Subsidiaries to enter
into this Agreement and to issue the Notes or the Subsidiary Guarantee or that
would reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect.


 


5.8.                              Compliance with Other
Instruments.    The
execution, delivery and performance of this Agreement and the issuance of the
Notes will not result in the violation of any instrument, judgment, order,
writ, decree or contract to which the Company is a party or by which it is
bound or, of any provision of federal or state statute, rule or regulation
applicable to it or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any Lien, charge or encumbrance upon any assets of the
Company or any of its Subsidiaries, except for a violation, conflict or default
that does not affect the ability of the Company or any of its Subsidiaries to
enter into this Agreement, to issue the Notes and perform its obligation under
the Notes or the Subsidiary Guarantee.


 


5.9.                              Delivery of Acquisition
Documents.   The Company has delivered to the Purchaser
true, accurate and complete copies of each of the Acquisition Documents which
are the only agreements of the Company relating to the Acquisition.


 


5

















 


5.10.                        No Governmental Approval
Necessary.  Assuming
the truth and accuracy of the Purchaser’s representations set forth in Article 4
of this Agreement, no consent by, approval of, giving of notice to,
registration with, or taking of any other action with respect to or by any
federal, state, or local governmental authority or organization is required for
any of the Company’s execution, delivery, or performance of this Agreement or
the issuance of the Notes and the execution and delivery of the Subsidiary
Guaranty by the Subsidiary Guarantors.


 


5.11.                        Private Placement.  Assuming the
truth and accuracy of the Purchaser’s representations set forth in Article 4
of this Agreement, the offer, sale and issuance of the Notes as contemplated by
this Agreement is exempt from the registration requirements of the Securities
Act.  Neither the Company nor any
authorized agent acting on behalf of it will take any action hereafter that
would cause the loss of such exemption


 


5.12.                        The Notes.  The Notes are
being issued as Additional Securities (as defined in the Indenture) under the
Indenture, and the Company has satisfied all the conditions set forth in Section 2.1(a) of
the Indenture for the issuance of the Notes as Additional Securities.  The Notes are secured by the Collateral (as
defined in the Indenture) pursuant to the Collateral Documents (as defined in
the Indenture).  The Notes constitute
Note Company Obligations under the Intercreditor Agreement (as defined in the
Indenture).


 


ARTICLE
6

CLOSING CONDITIONS


 


6.1                                 Purchaser’s Conditions.  The
obligation of the Purchaser to purchase and pay for the Notes provided for
hereunder on the Closing Date is subject to the satisfaction of the following
conditions, each as of the Closing Date:


 


6.1.1                        Representations and Warranties; No
Default.  After giving effect to the issuance of the
Notes and the Acquisition, all representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects,
and there shall exist no continuing Default or Event of Default under
the Indenture and no default or event of default under any Credit Facility.


 


6.1.2                        Delivery of Documents. 
The Purchaser shall have received the following items, each of which
shall be in form and substance reasonably satisfactory to the Purchaser and,
unless otherwise noted, dated as of the Closing Date:


 


6.1.2.1                    Resolutions of the board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and authorizing the issuance and
sale of the Notes certified as of the Closing Date by its secretary or an
assistant secretary as being in full force and effect.


 


6.1.2.2                    A copy of a certificate of
the Secretary of State of the State of Delaware, dated as of a recent date
prior to the Closing Date and listing all Governing Documents of the Company on
file with such Secretary, including any amendments thereto, and copies of all
such Governing Documents and certifying that the Company is duly organized and
in good standing under the laws of the State of Delaware.


 


6.1.2.3.                 A certificate of the Company, signed on its behalf by
a duly authorized officer and dated the Closing Date, certifying as to (i) the
absence of any amendment to the Governing Documents of the Company since the
date of the applicable secretary of state’s certificate referred to in Section 6.1.2.2,
(ii) its bylaws as in effect on the Closing Date and (iii) the 


 


6

















 


completeness and accuracy of the representations and
warranties contained in this Agreement as of the Closing Date, including the
absence of any event occurring and continuing, or resulting from the
transactions contemplated under this Agreement, that constitutes a Default or
an Event of Default under the Indenture.


 


6.1.2.4.                 A certificate of the secretary or an assistant secretary
of the Company certifying the names and true signatures of the officers of the
Company executing this Agreement.


 


6.1.2.5.                 A legal opinion of Ropes & Gray, LLP, counsel
for the Company, addressed to the Purchaser in substantially the form attached as
Exhibit B.


 


6.1.2.6.                 A certificate signed by a duly authorized officer of
the Company certifying that the conditions specified in this Section 6
have been fulfilled.


 


6.1.3.                     Working Capital Facility Amendment. 
The Company and the other parties thereto shall have executed an
amendment to the documents governing the Working Capital Facility to permit the
Company to fulfill its obligations under the Notes and the seller debt
described in the Acquisition Agreement.


 


6.1.4.                     Intercreditor Acknowledgement.  The
agent for the Working Capital Facility shall have executed an acknowledgement
with respect to the Intercreditor Agreement in form and substance satisfactory
to the Purchaser.


 


6.1.5.                     Co-Investor Notes.  The Co-Investors shall have paid for the
Co-Investor Notes as provided in Section 2.3 of each of the Co-Investor
Purchase Agreements.


 


6.1.6.                     Acquisition Closed. 
The Acquisition shall be consummated substantially simultaneously with
the Closing.


 


6.1.7.                     Issues of Notes.  The
Company shall have issued and delivered the Notes to the Purchaser against
payment therefor as contemplated by Section 2.3.


 


6.1.8.                     New Subsidiary Guarantors.  Each
of Cellu Tissue – Hauppauge, LLC, a Delaware limited liability company, and
Cellu Tissue – Thomaston, LLC, a Delaware limited liability company, shall have
executed a supplemental indenture pursuant to Section 3.12 of the
Indenture and the Subsidiary Guarantee executed by each Subsidiary Guarantor.


 


6.2.                              Company Conditions.  The
obligation of the Company to issue the Notes on the Closing Date as provided
herein is subject to the satisfaction of the following conditions, each as of
the Closing Date:


 


6.2.1.                     Purchase Price.  The
Purchaser shall have paid for the Notes as provided in Section 2.3.


 


6.2.2.                     Co-Investor Notes.  The Co-Investors
shall have paid for the Co-Investor Notes as provided in Section 2.3 of
each of the Co-Investor Purchase Agreements.


 


6.2.3.                     Representations and Warranties.  The
representations and warranties of the Purchaser set forth in Article 4
shall be true and correct.


 


7

















 


6.2.4.                     Acquisition Closed.  The
Acquisition shall be consummated substantially simultaneously with the Closing.


 


ARTICLE
7

RESTRICTIONS ON TRANSFER; LEGENDS


 


7.1.                              Assignments. 
After the Closing and subject to the restrictions referred to in Section 7.2,
the Purchaser may sell, assign, transfer or negotiate all or any part of their
Notes.


 


7.2.                              Restrictive Notes Legend. 
Each Note shall bear legends in substantially the forms contained in Exhibit A
and shall be subject to the restrictions on transfer contained in the Indenture
for as long as such restrictions shall be applicable.


 


7.3.                              Other Note Legends.  Each Note shall bear a legend in
substantially the following form:


 


“THIS NOTE BEARS ORIGINAL ISSUE DISCOUNT.  UPON WRITTEN REQUEST TO CELLU TISSUE
HOLDINGS, INC. 1855
LOCKEWAY DRIVE, STE. 501, ALPHARETTA, GEORGIA 30004, ATTENTION: CHIEF
EXECUTIVE OFFICER, INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL
ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY WILL BE MADE AVAILABLE.”


 


ARTICLE
8

MISCELLANEOUS


 


8.1.                              Amendments and Waivers.  No amendment, modification, termination or
waiver of any provision of this Agreement, shall in any event be effective
without the written consent of the Purchaser and the Company.


 


8.2.                              Expenses.  Each of the Company and the Purchaser shall
bear its own expenses incurred in connection with the execution and delivery of
this Agreement and the issuance of the Notes.


 


8.3.                              Notices.  All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and delivered personally or sent via a nationally
recognized overnight courier.  Such
notices, demands and other communications will be delivered or sent to the
address indicated below:


 


	
  If
  to the Company:

  	
   

  
	
   

  	
   

  
	
   

  	
  1855 Lockeway Drive, Ste.
  501

  
	
   

  	
  Alpharetta, Georgia 30004

  
	
   

  	
  Attention: Chief Executive
  Officer

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Ropes &
  Gray LLP

  
	
   

  	
  One
  International Place

  
	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
  Fax:
  (617) 951-7050

  
	
   

  	
  Attention: Lawrence D.
  Bragg III, Esq.

  



 


8

















 


	
  If
  to Purchaser:

  	
  UBS
  High Yield Relationship Fund

  
	
   

  	
  c/o
  UBS Global Asset Management (Americas) Inc.

  
	
   

  	
  One
  North Wacker Drive

  
	
   

  	
  Chicago,
  IL 60606

  
	
   

  	
  Attention: 
  Legal Department

  



 


or such other address or to
the attention of such other Person as the recipient party shall have specified
by prior written notice to the sending party. 
Any such communication shall be deemed to have been received when
actually delivered or refused.


 


8.4.                              Survival of Warranties and Certain
Agreements.  Any liability of the Company for any breach
of, or inaccuracy in, the representations and warranties made by it herein
shall survive the execution and delivery of this Agreement and the sale and
delivery of the Notes but shall expire one year after the date of the Closing.


 


8.5.                              Heading.  Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.


 


8.6.                              Applicable Law.  This Agreement shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York.


 


8.7.                              Successors and Assigns;
Subsequent Holders.  This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of the Purchaser; provided,
however, that the Company’s rights hereunder
may not be assigned without the written consent of Purchaser.


 


8.8.                              Consent to Jurisdiction and
Service of Process.  All
judicial proceedings with respect to this Agreement or any Notes may be brought
in any state or federal court of competent jurisdiction in the State of New
York and by execution and delivery of this Agreement the Company accepts for
itself and in connection with its properties, generally and unconditionally,
the jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement subject,
however, to rights of appeal.  The
Company hereby agrees that service upon it in the manner provided for the
giving of notices in Section 8.3 shall constitute sufficient notice.  Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
the Purchaser to bring proceedings against the Company in the courts of any
other jurisdiction.


 


8.9.                              Waiver of Jury Trial.  Each of the parties hereto waives, to the
full extent permitted by applicable law, trial by jury in any litigation in any
court with respect to, in connection with, or arising out of this Agreement or
any other Document or the validity, protection, interpretation, collection or
enforcement thereof.


 


8.10.                        Counterparts; Effectiveness.  This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.  This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties hereto, and when
written or telephonic notification of such execution and authorization of
delivery thereof has been received by the Company and the Purchaser.


 


9

















 


8.11.                        USA PATRIOT ACT.  The Purchaser is subject to the USA PATRIOT
ACT (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
and hereby notifies the Company that pursuant to the requirements of the Act,
it may be required to obtain, verify and record information that identifies the
Company,  which information includes the
name and address of the Company and other information that will allow such
Purchaser to identify the Company in accordance with the Act.  The Company hereby agrees to provide any such
information upon request, and to the disclosure of such information pursuant to
the requirements of the Act and notwithstanding any other provision hereof.


 


8.12.                        Entirety.  This Agreement embodies the entire agreement
among the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter hereof and thereof.


 


[Remainder of Page Intentionally Left Blank.]


 


10
















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by the respective duly authorized officers of the
undersigned and by the undersigned as of the date first written above.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CELLU TISSUE HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/David J. Morris

  
	
   

  	
   

  	
  Name:

  	
  David J. Morris

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  



 


Signature page to Note
Purchase Agreement


 

















 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  UBS High Yield
  Relationship Fund,

  
	
   

  	
  a series of the UBS
  Relationship Funds

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UBS Global Asset
  Management (Americas) Inc.,

  
	
   

  	
  its investment adviser

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Jennifer W. Haidu

  
	
   

  	
   

  	
  Name:

  	
  Jennifer W. Haidu

  
	
   

  	
   

  	
  Title:

  	
  Executive Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Michael J. Calhoun

  
	
   

  	
   

  	
  Name:

  	
  Michael J. Calhoun

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  



 


Signature page to Note
Purchase Agreement


 

















 


APPENDIX I


 


TO NOTE PURCHASE AGREEMENT


 


“Acquisition” has the meaning set forth in
the Recitals to the Agreement.


 


“Acquisition Agreement” means the Asset
Purchase Agreement dated as of July 2, 2008 among the Company and
Atlantic.


 


“Acquisition Documents” means (i) the
Acquisition Agreement; (ii) the 12% subordinated unsecured note due 2011
issued by the Company to Atlantic Paper & Foil, Corp. of N.Y.; (iii) the
Escrow Agreement, among Atlantic, Shaun Gabbay, as the sellers’ representative,
the Company and The Bank of New York Trust Company, N.A.; (iv) the
Guaranty Agreements, by and among the Company, the individual guarantors named
therein and Atlantic; (v) the Support Agreement, by and among the
individual owners named therein and the Company; (vi) the Non-Competition,
Non-Solicitation and Non-Disclosure Agreements, by and between each of the
individual owners named therein and the Company; (vii) the Assignment of
Purchase Agreement, between the Company and Cellu Tissue – Hauppauge, LLC; (viii) the
Assignment of Purchase Agreement, between the Company and Cellu Tissue –
Thomaston, LLC; (ix) Assignment and Assumption Agreement, between Atlantic
and Cellu Tissue – Thomaston, LLC; (x) Assignment and Assumption
Agreement, between Atlantic and Cellu Tissue – Hauppauge, LLC; (xi) Bill of
Sale, between Atlantic and Cellu Tissue – Thomaston, LLC; (xii) Bill of Sale,
between Atlantic and Cellu Tissue - Hauppauge, LLC; (xiii) the Lease between
Atlantic Paper & Foil, Corp. of N.Y. and Cellu Tissue – Hauppauge, LLC
with respect to the real property located at 325 Kennedy Drive, Hauppauge, New
York 11788; (xiv) the Lease between 
Atlantic Long Island Properties, Inc. and Cellu Tissue – Hauppauge,
LLC with respect to the real property located at 50 Gilpin Avenue, Hauppauge,
New York 11788; and (xv) the Lease between Atlantic Lakeside Properties, LLC
and Cellu Tissue – Thomaston, LLC with respect to the property located at 1201
Barnesville Street, Thomaston, Georgia 30286.


 


 “Agreement”
means the Note Purchase Agreement dated as of July 2, 2008 among the
Company and the Purchaser, as from time to time in effect, of which this
Appendix is a part.


 


“Atlantic” means, collectively, Atlantic
Paper & Foil Corp. of N.Y., Atlantic Lakeside Properties, LLC,
Atlantic Paper & Foil, LLC, Atlantic Paper & Foil of Georgia,
LLC and Consumer Licensing Corporation.


 


“Closing” shall have the meaning set forth in
Section 2.2 of the Agreement.


 


“Closing Date” means the date of the Closing
on which the Notes are issued and sold to the Purchaser pursuant to the
Agreement.


 


“Co-Investors” means Claren Road Credit
Master Fund, Ltd. and DDJ.


 


“Co-Investor Notes” means the Senior Secured
Notes issued to the Co-Investors pursuant to each of the Co-Investor Purchase
Agreements.


 


 “Co-Investor
Purchase Agreements” means the Note Purchase Agreements, dated as of the
Closing Date, between the Company and each of the Co-Investors.


 

















 


“Company” shall have the meaning set forth in
the preamble to the Agreement.


 


“Company SEC Filings” has the meaning set
forth in Section 5.4.1 of the Agreement.


 


“DDJ”
means, collectively, GMAM Investment Funds Trust II, for the account of the
Promark Alternative High Yield Bond Fund (Account No. 7M2E), GMAM
Investment Funds Trust, General Motors Welfare Benefit Trust (VEBA), GMAM
Investment Funds Trust II for the account of the Promark Alternative High Yield
Bond Fund (Account No. 7MWD), DDJ High Yield Fund, Multi-Style,
Multi-Manager Funds PLC The Global Strategic Yield Fund (f/k/a Multi-Style,
Multi-Manager Funds PLC The Global High Yield Fund, DDJ Capital Management
Group Trust, Stichting Pensioenfonds Hoogovens, Caterpillar Inc. Master
Retirement Trust, J.C. Penney Corporation, Inc. Pension Plan Trust,
Stichting Bewaarder Interpolis Pensioenen Global High Yield Pool, DDJ/Ontario
OS Investment Sub II, Ltd. and Stichting Pensioenfonds Metaal en Techniek.


 


“Exchange Act” means the United States
Exchange Act of 1934, as amended (and any 
successor statute.)


 


“GAAP”
means generally accepted accounting principles as from time to time in effect,
including the statements and interpretations of the United States Financial
Accounting Standards Board and shall mean when referring to any particular
financial statement such principles as in effect on the date of such financial
statements.


 


“Governing Documents” means, with respect to
any Person, such Person’s articles and by-laws if a corporation, operating
agreement, if a limited liability company or unlimited liability company and
limited partnership agreement and certificate of limited partnership, if a
limited partnership, and other similar governing documents, with respect to any
other entity.


 


“Governmental Authority” means any
government, governmental department, ministry, commission, board, bureau,
agency or instrumentality of any government, judicial, legislative or
administrative body having jurisdiction over the matter or matters in question.


 


“Indenture” has the meanings set forth in the
Recitals to the Agreement.


 


 “Material
Adverse Effect” means, since any specified date (or if no date is
specified, since February 29, 2008) or from the circumstances existing
immediately prior to the happening of any specified event, a material adverse
change in the prospects, business, assets or financial condition of the Company
and its Subsidiaries on a consolidated basis.


 


“Notes” has the meaning set forth in the
Recitals to the Agreement.


 


 “Person”
means any entity, whether of natural or legal constitution, including any
present or future individual, corporation, partnership, joint venture, limited
liability company, unlimited liability company, trust, estate, unincorporated
organization, government or any agency or political subdivision thereof.


 


 “Purchaser”
has the meaning set forth in the preamble to the Agreement.


 


“Securities Act” means the United States
Securities Act of 1933, as amended (and any successor statute).


 

















 


“SEC” means the Securities and Exchange
Commission of the United States.


 


“Senior Secured Notes” has the meaning set
forth in the Recitals to the Agreement.


 


“Subsidiary” means any corporation,
association or other business entity of which more than 50% of the total
ordinary voting power entitled to vote on the election of directors, managers
or trustees thereof (or persons performing similar functions) is owned,
directly or indirectly, by the Company.


 

















 


EXHIBIT
A


 


[FORM OF FACE OF NOTE]


 


THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION.  NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.  THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF
ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION
TERMINATION DATE”) THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED
INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM.  THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.


 


BY ITS ACQUISITION OF THIS
SECURITY THE HOLDER HEREOF WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED
THAT EITHER (I) NO PORTION OF THE ASSETS USED BY SUCH HOLDER TO ACQUIRE
AND HOLD THIS SECURITY CONSTITUTES THE ASSETS OF AN EMPLOYEE BENEFIT PLAN THAT
IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED (“ERISA”), OF PLANS, INDIVIDUAL RETIREMENT ACCOUNTS OR OTHER
ARRANGEMENTS THAT ARE SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE “CODE”), OR PROVISIONS UNDER ANY FEDERAL, STATE,
LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SIMILAR TO SUCH
PROVISIONS OF ERISA OR 


 


A-1

















 


THE CODE (“SIMILAR LAWS”),
OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE “PLAN ASSETS”
OF SUCH PLANS, ACCOUNTS OR ARRANGEMENTS, OR (II) THE PURCHASE AND HOLDING
OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406
OF ERISA OR SECTION 4975 OF THE CODE OR A SIMILAR VIOLATION UNDER ANY
APPLICABLE SIMILAR LAWS.


 


THIS NOTE BEARS ORIGINAL
ISSUE DISCOUNT.  UPON WRITTEN REQUEST TO
CELLU TISSUE HOLDINGS, INC. 1855 LOCKEWAY DRIVE, STE. 501, ALPHARETTA, GEORGIA
30004, ATTENTION: CHIEF EXECUTIVE OFFICER, INFORMATION REGARDING THE ISSUE
PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY WILL
BE MADE AVAILABLE.


 


	
  No. [      ]

  	
  Principal Amount $[   ]

  
	
   

  	
  CUSIP No. 151169 AF6

  



 


CELLU TISSUE HOLDINGS, INC.


 


93⁄4% Senior Secured Note, Series A,
due 2010


 


Cellu Tissue Holdings, Inc., a Delaware
corporation, promises to pay to [  ], or
its registered assigns, the principal sum of $[ 
] Dollars on March 15, 2010.


 


Interest Payment Dates:  March 15 and September 15

Record Dates:  March 1 and September 1


 


Additional provisions of this Security are
set forth on the other side of this Security.


 


 


	
   

  	
  CELLU TISSUE
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


A-2

















 


TRUSTEE’S CERTIFICATE OF
   AUTHENTICATION


 


THE BANK OF NEW YORK MELLON


TRUST COMPANY, N.A.

as Trustee, certifies

that this is one of

the Securities referred

to in the Indenture.


 


	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  	
  Date:
                      ,
  2008

  



 


A-3
















 


[FORM OF REVERSE SIDE OF
NOTE]

CELLU TISSUE HOLDINGS, INC.


 


93⁄4% Senior Secured Note, Series A,
due 2010


 


1.   Interest


 


Cellu Tissue Holdings, Inc., a Delaware
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.


 


The Company will pay interest semiannually on
March 15 and September 15 of each year commencing September 15,
2008.  Interest on the Securities will
accrue from the most recent date to which interest has been paid on the
Securities or, if no interest has been paid, from July 2, 2008.  The Company shall pay interest on overdue
principal, and on overdue premium or Additional Amounts, if any (plus interest
on such interest to the extent lawful), at the rate borne by the Securities to
the extent lawful.  Interest will be
computed on the basis of a 360-day year of twelve 30-day months.


 


2.   Method
of Payment


 


By no later than 10:00 a.m. (New York
City time) on the date on which any principal of, premium, if any, or interest
on any Security is due and payable, the Company shall irrevocably deposit with
the Trustee or the Paying Agent money sufficient to pay such principal,
premium, if any, Additional Amounts, if any, and/or interest (including
Additional Interest).  The Company will
pay interest (except Defaulted Interest) to the Persons who are registered
Holders of Securities at the close of business on the March 1 or September 1
next preceding the interest payment date even if Securities are cancelled,
repurchased or redeemed after the record date and on or before the interest
payment date.  Holders must surrender
Securities to a Paying Agent to collect principal payments.  The Company will pay principal, premium, if
any, and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. The Company will make all
payments in respect of a Definitive Security (including principal, premium, if
any, and interest) by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 15 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).


 


3.   Paying
Agent and Registrar


 


Initially, The Bank of New York Mellon Trust
Company, N.A. (the “Trustee”) will act as Trustee, Paying Agent and
Registrar.  The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.  The Company or 


 


A-4

















 


any of its
domestically organized, wholly owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.


 


4.   Indenture


 


The Company issued the Securities under an
Indenture dated as of March 12, 2004 (as it may be amended or supplemented
from time to time in accordance with the terms thereof, the “Indenture”),
among the Company, the Subsidiary Guarantors and the Trustee.  The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in
effect on the date of the Indenture (the “Act”).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Securities are subject to all terms and provisions
of the Indenture, and Securityholders are referred to the Indenture and the Act
for a statement of those terms.


 


The Securities are secured senior obligations
of the Company.  The aggregate principal
amount of Securities that may be authenticated and delivered under the
Indenture is unlimited, provided
that the Net Cash Proceeds from any issuance of Additional Securities are
invested in Additional Assets in accordance with the Indenture.  This Security is one of the 93⁄4% Senior
Secured Notes, Series A, due 2010 referred to in the Indenture.  The Securities include (i) $162,000,000
aggregate principal amount of the Company’s 93⁄4% Senior Secured Notes, Series A,
due 2010 issued under the Indenture on March 12, 2004 (herein called “Initial
Securities”), (ii) $20,255,572 aggregate principal amount of the
Company’s 93⁄4% Senior Secured Notes, Series A, due 2010 issued under the
Indenture on March 21, 2007 (the “2007 Notes”), (iii) $40,000,000
aggregate principal amount of the Company’s 93⁄4% Senior Secured Notes, Series A,
due 2010 issued under the Indenture on July 2, 2008 (the “2008 Notes”),
(iv) if and when issued, additional 93⁄4% Senior Secured Notes, Series A,
due 2010 or 93⁄4% Senior Secured Notes, Series B, due 2010 of the Company
that may be issued from time to time under the Indenture subsequent to March 12,
2004 (together, with the 2007 Notes and 2008 Notes, herein called “Additional
Securities”) as provided in Section 2.1(a) of the
Indenture and (v) if and when issued, the Company’s 93⁄4% Senior Secured Notes,
Series B, due 2010 that may be issued from time to time under the
Indenture in exchange for Initial Securities or Additional Securities in an
offer registered under the Securities Act as provided in any registration
rights agreements (herein called “Exchange Securities”).  The Initial Securities, Additional Securities
and Exchange Securities are treated as a single class of securities under the
Indenture and shall be secured by first and second priority Liens and security
interests, subject to Permitted Liens, in the Collateral.  The Indenture imposes certain limitations on
the incurrence of indebtedness, the making of restricted payments, the sale of
assets and subsidiary stock, the incurrence of certain liens, sale-leaseback
transactions, the sale of capital stock of restricted subsidiaries, the making
of payments for consents, the entering into of agreements that restrict
distribution from restricted subsidiaries and the consummation of mergers and
consolidations.  The Indenture also
imposes requirements with respect to the provision of financial information and
the provision of guarantees of the Securities by certain subsidiaries.


 


To guarantee the due and punctual payment of
the principal, premium, if any, and interest (including post-filing or post-petition
interest) on the Securities and all other amounts payable by the Company under
the Indenture, the Securities, the Collateral Documents and the 


 


A-5

















 


Intercreditor
Agreement when and as the same shall be due and payable, whether at maturity,
by acceleration or otherwise, according to the terms of the Securities and the
Indenture, the Subsidiary Guarantors have unconditionally guaranteed (and
future guarantors, together with the Subsidiary Guarantors, will
unconditionally Guarantee), jointly and severally, such obligations on a
senior, secured basis pursuant to the terms of the Indenture.


 


5.   Redemption


 


Except as set forth below, the Securities
will not be redeemable at the option of the Company prior to March 15,
2007.  On and after such date, the
Securities will be redeemable, at the Company’s option, in whole or in part, at
any time upon not less than 30 nor more than 60 days’ prior notice mailed
by first-class mail to each Holder’s registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest (including Additional Interest) to the applicable
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date):


 


If redeemed during the 12-month period
commencing on March 15 of the years set forth below:


 


	
  Period

  	
   

  	
  Redemption

  Price

  	
   

  
	
  2007

  	
   

  	
  107.313

  	
  %

  
	
  2008

  	
   

  	
  103.656

  	
  %

  
	
  2009 and
  thereafter

  	
   

  	
  100.000

  	
  %

  



 


In addition, at any time and from time to
time prior to March 15, 2007, the Company may redeem in the aggregate up
to 35% of the original principal amount of the Securities with the Net Cash
Proceeds of one or more Public Equity Offerings by the Company or with the Net
Cash Proceeds of one or more Public Equity Offerings by Holdings that are
contributed to the Company as common equity capital at a redemption price
(expressed as a percentage of principal amount) of 109.750% of the principal
amount thereof, plus accrued and unpaid interest (including Additional
Interest), if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date); provided, that:


 


(1)           there
is a Public Market at the time of such redemption;


 


(2)           at
least 65% of the original principal amount of the Securities must remain
outstanding after each such redemption; and


 


(3)           each
such redemption occurs within 60 days of the date of closing of such Public
Equity Offering.


 


If the optional redemption date is on or
after an interest record date and on or before the related interest payment
date, the accrued and unpaid interest (including Additional 


 


A-6

















 


Interest), if
any, will be paid on the optional redemption date to the Person in whose name
the Security is registered at the close of business on such record date, and no
additional interest will be payable to Holders whose Securities will be subject
to redemption by the Company.


 


In the case of any partial redemption,
selection of the Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed or, if the Securities are not
listed, then on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate, although no
Security of $1,000 in original principal amount or less will be redeemed in
part.  If any Security is to be redeemed
in part only, the notice of redemption relating to such Security shall state
the portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Security.  On and after the redemption date, interest
will cease to accrue on Securities or portions thereof called for redemption as
long as the Company has deposited with the Paying Agent funds in satisfaction
of the applicable redemption price pursuant to the Indenture.


 


Prior to the mailing of any notice of
redemption of the Securities, the Company shall deliver to the Trustee an
Officers’ Certificate stating that the Company is entitled to effect such
redemption, accompanied by an opinion of counsel satisfactory to the Trustee,
acting reasonably, that the conditions precedent to the right of redemption
have occurred.  Any such notice to the
Trustee may be cancelled at any time prior to notice of such redemption being
mailed to any Holder and shall thereby be void and of no effect.  The Company will be bound to redeem the
Securities on the date fixed for redemption.


 


The Company is not required to make any
mandatory redemption payments or sinking fund payments with respect to the
Securities.


 


6.   Optional
Tax Redemption


 


If any taxes,
assessments or other governmental charges are imposed by any jurisdiction where
the Company, a Subsidiary Guarantor or a successor of either (a “Payor”)
is organized or otherwise considered by a taxing authority to be a resident for
tax purposes, any jurisdiction from or through which the Payor makes a payment
on the Securities, or, in each case, any political organization or governmental
authority thereof or therein having the power to tax (the “Relevant Tax
Jurisdiction”) in respect of any payments under the Securities, the Payor
will pay to each Holder of a Security, to the extent it may lawfully do so,
such additional amounts (“Additional Amounts”) as may be necessary in
order that the net amounts paid to such Holder will be not less than the amount
specified in such Security to which such Holder is entitled; provided, however,
the Payor will not be required to make any payment of Additional Amounts for or
on account of:


 


(1)                                  any tax, assessment
or other governmental charge which would not have been imposed but for (A) the
existence of any present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a
power over, such Holder, if such Holder is an estate, trust, partnership,
limited liability company or corporation) and the Relevant Tax 


 


A-7

















 


Jurisdiction other than solely by the holding of Securities or by the
receipt of principal or interest in respect of the Securities (including,
without limitation, such Holder (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) being or having been a citizen or resident
thereof or being or having been present or engaged in trade or business therein
or having or having had a permanent establishment therein) or (B) the
presentation of a Security (where presentation is required) for payment on a
date more than 30 days after (x) the date on which such payment became due
and payable or (y) the date on which payment thereof is duly provided for
and notice of the availability of the funds has been given, whichever occurs
later (in either case (x) or (y), except to the extent that the Holder
would have been entitled to Additional Amounts had the Security been presented
during such 30-day period);


 


(2)                                  any estate,
inheritance, gift, sales, transfer, personal property or similar tax,
assessment or other governmental charge;


 


(3)                                  any tax, assessment
or other governmental charge that is imposed or withheld by reason of the
failure by the Holder or the beneficial owner of the Security to comply with a
reasonable and timely request of the Payor addressed to the Holder to provide
information, documents or other evidence concerning the nationality, residence
or identity of the Holder or such beneficial owner which is required by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such tax,
assessment or other governmental charge; or


 


(4)                                  any combination of
the above;


 


nor will
Additional Amounts be paid with respect to any payment of the principal of, or
any premium or interest (including Additional Interest)
on, any Security to any Holder who is a fiduciary or partnership or limited
liability company or other than the sole beneficial owner of such payment to
the extent that a beneficiary or settlor with respect to such fiduciary or a
member of such partnership, limited liability company or beneficial owner would
not have been entitled to such Additional Amounts had it been the Holder of such Security.


 


The Payor will
provide the Trustee with the official acknowledgment of the Relevant Tax Authority
(or, if such acknowledgment is not available, a certified copy thereof)
evidencing the payment of the withholding taxes by the Payor.  Copies of such documentation will be made
available to the Holders of the Securities or the Paying Agent, as applicable,
upon request therefor.


 


The Company and the
Subsidiary Guarantors will pay any present or future stamp, court or
documentary taxes, or any other excise or property taxes, charges or similar
levies which arise in any jurisdiction from the execution, delivery or
registration of the Securities or any other document or instrument referred to
therein (other than a transfer of the Securities), or the receipt of any
payments with respect to the Securities, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside the United States of America
or Canada or any jurisdiction in which a paying agent is located, other than
those resulting from, or required to be 


 


A-8

















 


paid in connection with,
the enforcement of the Securities or any other such document or instrument
following the occurrence of any Event of Default with respect to the
Securities.


 


All references in the Indenture
to principal of, premium, if any, and interest on the Securities will include
any Additional Interest and any Additional Amounts payable by the Payor in
respect of such principal, such premium, if any, and such interest.


 


The Payor will be entitled to redeem all, but
not less than all, of the Securities if as a result of any change in or
amendment to the laws, regulations or rulings of any Relevant Tax Jurisdiction
or any change in the official application or interpretation of such laws,
regulations or rulings, or any change in the official application or interpretation
of, or any execution of or amendment to, any treaty or treaties affecting
taxation to which such Relevant Tax Jurisdiction is a party (a “Change in
Tax Law”) the Payor is or would be required on the next succeeding interest
payment date to pay Additional Amounts with respect to the Securities as
described under Section 5.9(a) of the Indenture and the Payor
delivers to the Trustee an Officers’ Certificate stating that the payment of
such Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Payor and that the Payor is entitled to redeem the Securities
pursuant to their terms.  The Change in
Tax Law must become effective on or after the Issue Date.  Further, the Payor must deliver to the
Trustee at least 30 days before the redemption date an opinion of counsel of
recognized standing to the effect that the Payor has or will become obligated
to pay Additional Amounts as a result of such Change in Tax Law.  The Payor must also provide the Holders with
notice of the intended redemption at least 30 days and no more than 60 days
before the redemption date and shall comply with all provisions of Article V
of the Indenture.  The redemption price
will equal the principal amount of the Securities plus accrued and unpaid
interest thereon (including Additional Interest), if any to the redemption
date, premium, if any, and Additional Amounts, if any, then due and which
otherwise would be payable.


 


7.   Repurchase
Provisions


 


If a Change of Control occurs, unless the
Company has exercised its right to redeem all of the Securities as described
under paragraph 5 of the Securities, each Holder will have the right to require
the Company to repurchase from each Holder all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder’s Securities at a purchase price
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture.


 


8.   Denominations;
Transfer; Exchange


 


The Securities are in registered form without
coupons in denominations of principal amount of $1,000 and whole multiples of
$1,000.  A Holder may transfer or
exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay a sum sufficient to cover any taxes and fees required by law or permitted
by the Indenture.  The Registrar need not
register the transfer of or exchange of any Security (A) for a period
beginning (1) 15 days before the mailing of a notice of an offer to
repurchase or redeem Securities and ending at the close of 


 


A-9

















 


business on
the day of such mailing or (2) 15 days before an interest payment
date and ending on such interest payment date or (B) called for
redemption, except the unredeemed portion of any Security being redeemed in
part.


 


9.   Persons
Deemed Owners


 


The registered Holder of this Security may be
treated as the owner of it for all purposes.


 


10.   Unclaimed
Money


 


If money for the payment of principal,
premium, if any, or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to the Company at its request unless an
abandoned property law designates another Person.  After any such payment, Holders entitled to
the money must look only to the Company for payment as general creditors unless
an abandoned property law designates another person and not to the Trustee for
payment.


 


11.   Defeasance


 


Subject to certain exceptions and conditions
set forth in the Indenture, the Company at any time may terminate some or all
of its obligations under the Securities, the Indenture, the Collateral
Documents and the Intercreditor Agreement if the Company deposits with the
Trustee money or U.S. Government Obligations for the payment of principal,
premium, if any, and interest on the Securities to redemption or maturity, as
the case may be.


 


12.   Amendment,
Supplement, Waiver


 


Subject to certain exceptions set forth in
the Indenture, (i) the Indenture, the Securities, the Subsidiary
Guarantees, the Collateral Documents or the Intercreditor Agreement may be
amended or supplemented by the Company, Subsidiary Guarantors and Trustee with
the written consent of the Holders of at least a majority in principal amount
of the then outstanding Securities and (ii) any default (other than with
respect to nonpayment or in respect of a provision that cannot be amended
without the written consent of each Securityholder affected) or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in principal amount of the then outstanding Securities.  Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company,
Subsidiary Guarantors and the Trustee may amend or supplement the Indenture,
the Securities, the Subsidiary Guarantees, the Collateral Documents or the
Intercreditor Agreement to cure any ambiguity, omission, defect or
inconsistency, to comply with Article IV or Article X of the
Indenture, to provide for uncertificated Securities in addition to, or in place
of, certificated Securities, to add Guarantees with respect to the Securities,
to release Subsidiary Guarantors upon their designation as Unrestricted
Subsidiaries or otherwise in accordance with the Indenture, to secure the
Securities, to release Liens in favor of the Collateral Agent in the Collateral
as provided under the collateral release provisions, to add additional
covenants of the Company, to surrender rights and powers conferred on the
Company, to comply with any requirement of the SEC in connection with
qualifying the Indenture under the Act, to make any change that does not
adversely affect the rights of any Securityholder or, in the case of the 


 


A-10

















 


Intercreditor
Agreement, that does not adversely affect the rights of any Securityholder in
any material respect, or to provide for the issuance of Exchange Securities.


 


13.   Defaults
and Remedies


 


Under the Indenture, Events of Default
include (each of which is described in greater detail in the Indenture) (i) default
for 30 days in payment of interest, Additional Interest or Additional
Amounts when due on the Securities; (ii) default in payment of principal
or premium, if any, on the Securities at Stated Maturity, upon required
repurchase or upon optional redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise; (iii) the failure by the
Company or any Subsidiary Guarantor to comply with its obligations under Article IV
or Section 10.2 of the Indenture; (iv) failure by the Company to
comply for 30 days after written notice with any of its obligations under
the covenants described under Sections 3.2 through 3.12 inclusive, Section 3.16
or Section 3.19 of the Indenture (in each case, other than a failure to
purchase Securities when required under the Indenture, which failure shall
constitute an Event of Default under clause (ii) above) or failure by
the Company or any Subsidiary Guarantor to comply for 30 days after written
notice with any of its obligations under the Collateral Documents; (v) the
failure by the Company to comply for 60 days after written notice with its
other agreements contained in the Indenture or under the Securities (other than
those referred to in clause (i), (ii), (iii) or (iv) above); (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted Subsidiaries), other than
Indebtedness owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of,
or interest or premium, if any, on such Indebtedness at maturity prior to the
expiration of the grace period provided in such Indebtedness (“payment
default”) or (b) results in the acceleration of such Indebtedness prior
to its maturity (the “cross acceleration provision”) and, in each case,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a payment
default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vii) certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary or group of
Restricted Subsidiaries that, taken together (as of the latest audited consolidated
financial statements for the Company and its Restricted Subsidiaries), would
constitute a Significant Subsidiary (the “bankruptcy provisions”); (viii) failure
by the Company or any Significant Subsidiary or group of Restricted
Subsidiaries that, taken together (as of the latest audited consolidated
financial statements for the Company and its Restricted Subsidiaries), would
constitute a Significant Subsidiary to pay final judgments aggregating in
excess of $5.0 million (net of any amounts that a reputable and
creditworthy insurance company has acknowledged liability for in writing),
which judgments are not paid, discharged, waived or stayed for a period of
60 days (the “judgment default provision”); (ix) any
Subsidiary Guarantee or Collateral Document ceases to be in full force and
effect (except as contemplated by the terms of the Indenture) or is declared
null and void in a judicial proceeding or any of Holdings, the Company or any
Subsidiary Guarantor denies or disaffirms its obligations under the Indenture,
any Subsidiary Guarantee, any Collateral Document to which it is a party or the
Intercreditor Agreement; or (x) with respect to any Collateral having a
fair market value in excess of $5.0 million, individually or in the aggregate, (A) the
security interest under the Collateral 


 


A-11

















 


Documents, at
any time, ceases to be in full force and effect for any reason other than in
accordance with their terms and the terms of the Indenture and other than the
satisfaction in full of all obligations under the Indenture and discharge of
the Indenture, (B) any security interest created thereunder or under the
Indenture is declared invalid or unenforceable or (C) Holdings, the
Company or any Subsidiary Guarantor asserts, in any pleading in any court of
competent jurisdiction, that any such security interest is invalid or
unenforceable.  However, a default under
clause (iv) or (v) will not constitute an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified in clause (iv) or (v) hereof
after receipt of such notice.


 


If an Event of Default (other than an Event
of Default described in (vii) hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the outstanding Securities by notice to the Company and the Trustee,
may, and the Trustee at the request of such Holders shall, declare all the
Securities to be due and payable immediately. 
If an Event of Default described in clause (vii) hereof occurs and
is continuing, the principal of, premium, if any, and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.


 


Securityholders may not enforce the Indenture
or the Securities except as provided in the Indenture.  The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Securityholders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.


 


14.   Trustee
Dealings with the Company


 


Subject to certain limitations set forth in
the Indenture, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with and collect obligations owed to it by the Company or their Affiliates and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee.


 


15.   No
Recourse Against Others


 


An incorporator, director, officer, employee
or stockholder of each of the Company or any Subsidiary Guarantor, solely by
reason of this status, shall not have any liability for any obligations of the
Company or any Subsidiary Guarantor under the Securities, the Indenture, the
Collateral Documents, the Intercreditor Agreement, any Subsidiary Guarantees or
for any claim based on, in respect of or by reason of such obligations or their
creation.  By accepting a Security, each
Securityholder waives and releases all such liability.  The waiver and release are part of the
consideration for the issue of the Securities.


 


A-12

















 


16.   Authentication


 


This Security shall not be valid until an
authorized officer of the Trustee (or an authenticating agent acting on its
behalf) manually signs the certificate of authentication on the other side of
this Security.


 


17.   Abbreviations


 


Customary abbreviations may be used in the
name of a Securityholder or an assignee, such as TEN COM (= tenants in common),
TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (= custodian) and U/G/M/A (=
Uniform Gift to Minors Act).


 


18.   CUSIP,
Common Code and ISIN Numbers


 


The Company has caused CUSIP, Common Code and ISIN numbers,
if applicable, to be printed on the Securities and has directed the Trustee to
use CUSIP, Common Code and ISIN numbers, if applicable, in notices of
redemption or purchase as a convenience to Securityholders.  No representation is made as to the accuracy
of such numbers either as printed on the Securities or as contained in any
notice of redemption or purchase and reliance may be placed only on the other
identification numbers placed thereon.


 


19.   Governing
Law


 


This Security shall be governed by, and
construed in accordance with, the laws of the State of New York.


 


A-13
















 


ASSIGNMENT FORM


 


To assign this Security, fill in the form
below:


 


I or we assign and transfer this Security to:


 




(Print or type assignee’s name, address and zip code)





 


 




(Insert assignee’s social security or tax I.D. No.)





 


and irrevocably appoint
                  agent
to transfer this Security on the books of the Company. The agent may substitute
 another to act for him. 


 


	
  Date:

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
  (Signature
  must be guaranteed)

  
						



 


 




Sign exactly as your name appears on the other side of this Security.





 


The signature(s) should be
guaranteed by an eligible guarantor institution (banks, stockbrokers, savings
and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.


 


In connection
with any transfer or exchange of any of the Securities evidenced by this
certificate occurring prior to the date that is two years after the later of
the date of original issuance of such Securities and the last date, if any, on
which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:


 


CHECK ONE BOX BELOW:


 


	
  (1)

  	
   ̈

  	
  acquired for
  the undersigned’s own account, without transfer; or

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   ̈

  	
  transferred
  to the Company; or

  
	
   

  	
   

  	
   

  
	
  (3)

  	
   ̈

  	
  transferred
  pursuant to and in compliance with Rule 144A under the Securities Act of
  1933, as amended (the “Securities Act”); or

  
	
   

  	
   

  	
   

  
	
  (4)

  	
   ̈

  	
  transferred
  pursuant to an effective registration statement under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  (5)

  	
   ̈

  	
  transferred
  pursuant to and in compliance with Regulation S under the Securities
  Act; or

  



 


A-14

















 


	
  (6)

  	
   ̈

  	
  transferred
  to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),
  (3) or (7) under the Securities Act), that has furnished to the Trustee
  a signed letter containing certain representations and agreements (the form
  of which letter appears as Section 2.8 of the Indenture); or

  
	
   

  	
   

  	
   

  
	
  (7)

  	
   ̈

  	
  transferred
  pursuant to another available exemption from the registration requirements of
  the Securities Act of 1933, as amended.

  



 


Unless one of the boxes is
checked, the Trustee will refuse to register any of the Securities evidenced by
this certificate in the name of any person other than the registered Holder
thereof; provided, however, that
if box (5), (6) or (7) is checked, the Company may require, prior to
registering any such transfer of the Securities, in its sole discretion, such
legal opinions, certifications and other information as the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended, such as the exemption
provided by Rule 144 under such Act.


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
   

  	
  Signature

  



 


 


The signature(s) should be
guaranteed by an eligible guarantor institution (banks, stockbrokers, savings
and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.


 


TO BE COMPLETED BY PURCHASER IF
BOX (1) OR (3) ABOVE IS CHECKED.


 


The
undersigned represents and warrants that it is purchasing this Security for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, as
amended, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is relying
upon the undersigned’s foregoing representations in order to claim the
exemption from registration provided by Rule 144A.


 


	
   

  	
   

  
	
   

  	
  Dated:

  



 


A-15

















 


OPTION OF HOLDER TO ELECT
PURCHASE


 


If you elect to have this Security purchased
by the Company pursuant to Section 3.5 or 3.10 of the Indenture, check
either box:


 


	
   

  	
   ̈

  	
   

  	
   ̈

  	
   

  
	
   

  	
  3.5

  	
   

  	
  3.10

  	
   

  



 


If you want to elect to have only part of
this Security purchased by the Company pursuant to Section 3.5 or Section 3.10
of the Indenture, state the amount in principal amount (must be integral
multiple of $1,000): 
$                                  
                                                     
and specify the denomination or denominations (which shall not be less than the
minimum authorized denomination) of the Securities to be issued to the Holder
for the portion of the within Security not being repurchased (in the absence of
any such specification, one such Security will be issued for the portion not
being repurchased):
                                  .


 


	
  Date:

  	
   

  	
   

  	
  Your
  Signature

  	
   

  
	
  (Sign
  exactly as your name appears on the other side of the Security)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
  (Signature
  must be guaranteed)

  
						



 


The signature(s) should be
guaranteed by an eligible guarantor institution (banks, stockbrokers, savings
and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.


 


A-16

















 


SUBSIDIARY
GUARANTEE


 


Pursuant to the Indenture (the “Indenture”) dated as of March 12,
2004  among Cellu Tissue Holdings, Inc.,
the Subsidiary Guarantors party thereto (each a “Subsidiary Guarantor”
and collectively the “Subsidiary Guarantors”) and The Bank of New York
Mellon Trust Company, N.A., as successor trustee to The Bank of New York (the “Trustee”), each Subsidiary
Guarantor, subject to the provisions of Article X of the Indenture,
hereby fully, unconditionally and irrevocably guarantees, as primary obligor
and not merely as surety, jointly and severally with each other Subsidiary
Guarantor, to each Holder of the Securities, to the extent lawful, and the
Trustee the full and punctual payment when due, whether at maturity, by
acceleration, by redemption or otherwise, of the principal of, premium, if any,
Additional Amounts, if any, and interest (including Additional Interest) on the
Securities and all other obligations and liabilities of the Company under the
Indenture (including without limitation interest (including Additional
Interest) accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company or any Subsidiary Guarantor whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding and the obligations
under Section 7.7 of the Indenture), the Collateral Documents and
the Intercreditor Agreement (all the foregoing being hereinafter collectively
called the “Obligations”).  Each
Subsidiary Guarantor agrees that the Obligations will rank equally in right of
payment with other Indebtedness of such Subsidiary Guarantor, except to the
extent such other Indebtedness is subordinate to the Obligations.  Each Subsidiary Guarantor further agrees (to
the extent permitted by law) that the Obligations may be extended or renewed,
in whole or in part, without notice or further assent from it, and that it will
remain bound under this Subsidiary Guarantee notwithstanding any extension or
renewal of any Obligation.


 


Each Subsidiary Guarantor waives presentation
to, demand of payment from and protest to the Company of any of the Obligations
and also waives notice of protest for nonpayment.  Each Subsidiary Guarantor waives notice of
any default under the Securities or the Obligations.


 


Each Subsidiary Guarantor further agrees that
its Subsidiary Guarantee herein constitutes a Guarantee of payment when due
(and not a Guarantee of collection) and waives any right to require that any
resort be had by any Holder to any security held for payment of the
Obligations.


 


Except as set forth in Section 10.2
of the Indenture, the obligations of each Subsidiary Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or termination for any
reason (other than payment of the Obligations in full), including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Obligations
or otherwise.  Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor
herein shall not be discharged or impaired or otherwise affected by (a) the
failure of any Holder to assert any claim or demand or to enforce any right or
remedy against the Company or any other person under the Indenture, the
Securities or any other agreement or otherwise; (b) any extension or
renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of the 


 


A-17

















 


Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or the
Collateral Agent for the Obligations or any of them; (e) the failure of
any Holder to exercise any right or remedy against any other Subsidiary
Guarantor; (f) any change in the ownership of the Company; (g) any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or (h) any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of any Subsidiary Guarantor or would otherwise operate as a discharge of
such Subsidiary Guarantor as a matter of law or equity.


 


Each Subsidiary Guarantor agrees that its
Subsidiary Guarantee herein shall remain in full force and effect until payment
in full of all the Obligations or such Subsidiary Guarantor is released from
its Subsidiary Guarantee upon the merger or the sale of all the Capital Stock
or assets of the Subsidiary Guarantor or otherwise in compliance with Section 10.2
or Article VIII of the Indenture. 
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of, premium, if any, or
interest on any of the Obligations is rescinded or must otherwise be restored
by any Holder upon the bankruptcy or reorganization of the Company or
otherwise.


 


In furtherance of the foregoing and not in
limitation of any other right which any Holder has at law or in equity against
any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to
pay any of the Obligations when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, each Subsidiary
Guarantor hereby promises to and will, upon receipt of written demand by the Trustee,
forthwith pay, or cause to be paid, in cash, to the Trustee or the Trustee on
behalf of the Holders an amount equal to the sum of (i) the unpaid amount
of such Obligations then due and owing and (ii) accrued and unpaid
interest (including Additional Interest) on such Obligations then due and owing
(but only to the extent not prohibited by law).


 


Each Subsidiary Guarantor represents and
warrants to each Holder of Securities that such Subsidiary Guarantor has taken all necessary action to authorize the
execution and delivery of this Subsidiary Guarantee and the performance of its
obligations hereunder.  This Subsidiary
Guarantee constitutes the valid and legally binding obligation of such
Subsidiary Guarantee enforceable in accordance with its terms subject to
bankruptcy laws and general principles of equity.


 


Each Subsidiary Guarantor further agrees
that, as between such Subsidiary Guarantor, on the one hand, and the Holders,
on the other hand, (x) the maturity of the Obligations guaranteed hereby
may be accelerated as provided in the Indenture for the purposes of its
Subsidiary Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any such declaration of
acceleration of such Obligations, such Obligations (whether or not due and
payable) shall forthwith become due and payable by the Subsidiary Guarantor for
the purposes of this Subsidiary Guarantee.


 


A-18

















 


Each Subsidiary Guarantor also agrees to pay
any and all reasonable costs and expenses (including reasonable attorneys’
fees) incurred by the Trustee or the Holders in enforcing any rights under this
Subsidiary Guarantee.


 


A-19

















 


	
   

  	
  CELLU
  TISSUE CORPORATION –

  NATURAL DAM

  
	
   

  	
  CELLU
  TISSUE CORPORATION –

  NEENAH

  
	
   

  	
  CELLU TISSUE LLC

  
	
   

  	
  CELLU TISSUE-CITY FOREST LLC

  
	
   

  	
  CELLU TISSUE – HAUPPAUGE, LLC

  
	
   

  	
  CELLU TISSUE – THOMASTON, LLC

  
	
   

  	
  INTERLAKE
  ACQUISITION

  CORPORATION LIMITED

  
	
   

  	
  MENOMINEE
  ACQUISITION

  CORPORATION

  
	
   

  	
  VAN PAPER COMPANY

  
	
   

  	
  VAN TIMBER COMPANY,

  
	
   

  	
  as
  Subsidiary Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COASTAL
  PAPER COMPANY, as a

  Subsidiary Guarantor

  
	
   

  	
   

  
	
   

  	
  By: Van
  Paper Company, its managing

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title: